II 

112TH CONGRESS 

1ST SESSION S. 971 

To promote neutrality, simplicity, and fairness in the taxation of digital 

goods and digital services. 

IN THE SENATE OF THE UNITED STATES 

MAY 12, 2011 

Mr. WYDEN (for himself and Mr. THUNE) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To promote neutrality, simplicity, and fairness in the 

taxation of digital goods and digital services. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Digital Goods and 

5 Services Tax Fairness Act of 2011’’. 

6 SEC. 2. FINDING. 

7 The Congress finds that it is appropriate to exercise 

8 congressional enforcement authority under section 5 of the 

9 14th amendment to the Constitution of the United States 

10 and Congress’ plenary power under article I, section 8, 


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1 clause 3 of the Constitution of the United States (com2 monly known as the ‘‘commerce clause’’) in order to en3 sure that States and political subdivisions thereof do not 

4 discriminate against providers and consumers of digital 

5 goods and digital services by imposing multiple, excessive 

6 and discriminatory taxes and other burdens on such pro7 viders and consumers. 

8 SEC. 3. MULTIPLE AND DISCRIMINATORY TAXES PROHIB9 ITED. 

10 No State or local jurisdiction shall impose multiple 

11 or discriminatory taxes on or with respect to the sale or 

12 use of digital goods or digital services. 

13 SEC. 4. RETAIL, SOURCING, AND OTHER LIMITATIONS AND 

14 RULES. 

15 (a) RETAIL LIMITATION.—Taxes on or with respect 

16 to the sale of digital goods or digital services may only 

17 be imposed on or with respect to a sale to a customer. 

18 (b) TAXPAYER LIMITATION.—Taxes on or with re19 spect to the sale of digital goods or digital services may 

20 only be imposed on and collected only from a customer 

21 or a seller. 

22 (c) SOURCING LIMITATION.— 

23 (1) IN GENERAL.—Taxes on or with respect to 

24 the sale of digital goods or digital services may be 

25 imposed only by the State and local jurisdictions 


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1 whose territorial limits encompass the customer’s tax 

2 address. 

3 (2) MULTIPLE LOCATIONS.—If the sale of dig4 ital goods or digital services is made to multiple lo5 cations of a customer, whether simultaneously or 

6 over a period of time, the seller may determine the 

7 customer’s tax address or addresses using the ad8 dress or addresses of use as provided by the cus9 tomer. 

10 (3) SELLER HELD HARMLESS.—A seller that 

11 relies in good faith on information provided by a 

12 customer to determine the customer’s tax address or 

13 addresses shall not be held liable for any additional 

14 tax based on a different determination of the cus15 tomer’s tax address or addresses. 

16 (d) LIMITATION ON EXPANSIVE INTERPRETATION.— 

17 No tax on or with respect to the sale or use of tangible 

18 personal property, telecommunications service, Internet 

19 access service, or audio or video programming service may 

20 be construed by any regulation, administrative ruling, or 

21 otherwise, to be imposed on or with respect to the sale 

22 or use of a digital good or a digital service. For purposes 

23 of this Act, a transaction involving a digital good shall 

24 be characterized solely as a transaction involving the pro25 vision of a digital service unless the transaction results 


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1 in the transfer or delivery of a complete copy, with the 

2 right to use permanently or for a specified period, of the 

3 digital good that is the subject of the transaction. No tax 

4 on or with respect to the sale or use of a digital good may 

5 be construed by any regulation, administrative ruling, or 

6 otherwise, to be imposed on or with respect to the sale 

7 or use of a digital service. The limitations provided by this 

8 subsection shall not apply to any construction of a statute 

9 that was approved by a judicial interpretation of that stat10 ute on or before the date of the enactment of this Act. 

11 (e) TREATMENT OF BUNDLED GOODS AND SERV12 ICES.— 

13 (1) IN GENERAL.—Subject to paragraph (2), if 

14 charges for digital goods or digital services are ag15 gregated with, and not separately stated from, 

16 charges for other goods or services, then the charges 

17 for digital goods or digital services may be taxed for 

18 purposes of this Act at the same rate and on the 

19 same basis as charges for the other goods or services 

20 unless the seller can reasonably identify the charges 

21 for the digital goods or digital services from its 

22 books and records kept in the regular course of busi23 ness. 

24 (2) CHARGES FOR DELIVERY AND TRANSFER.— 

25 If the charge for a digital good or digital service is 


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1 aggregated with, and not separately stated from, a 

2 charge for electronically delivering or transferring 

3 the digital good, or providing the digital service, to 

4 the customer, then the seller may either apply para5 graph (1) or treat the service of electronic delivery 

6 or transfer as a non-severable and incidental compo7 nent of the digital good or digital service. 

8 (f) TREATMENT OF DIGITAL CODE.—The tax treat9 ment of the sale of a digital code shall be the same as 

10 the tax treatment of the sale of the digital good or digital 

11 service to which the digital code relates. The sale of the 

12 digital code shall be considered the sale transaction for 

13 purposes of this Act. 

14 SEC. 5. DEFINITIONS. 

15 In this Act: 

16 (1) CUSTOMER.— 

17 (A) IN GENERAL.—Subject to subpara18 graph (B), the term ‘‘customer’’ means a per19 son that purchases a digital good or digital 

20 service, for a purpose other than resale. 

21 (B) END USER.—For the purpose of deter22 mining a place of primary use under paragraph 

23 (2)(A), the term ‘‘customer’’ means the ‘‘end 

24 user’’ (as such term is used in section 124 of 


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1 title 4, United States Code) of the purchased 

2 digital good or digital service. 

3 (2) CUSTOMER’S TAX ADDRESS.—The term 

4 ‘‘customer’s tax address’’ means— 

5 (A) with respect to digital goods or digital 

6 services that are sold to a customer by a pro7 vider of mobile telecommunications service that 

8 is subject to being sourced under section 117 of 

9 title 4, United States Code, or for which the 

10 charges are billed to the customer by such pro11 vider, and delivered or transferred electronically 

12 by means of such provider’s mobile tele13 communications service, the customer’s place of 

14 primary use, as defined in section 124 of such 

15 title; 

16 (B) if subparagraph (A) does not apply, 

17 and if the digital good or digital service is re18 ceived by the customer at a business location of 

19 the seller, such business location; 

20 (C) if neither subparagraph (A) nor sub21 paragraph (B) applies, and if the location where 

22 the digital good or digital service is received by 

23 the customer is known to the seller, such loca24 tion; 


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1 (D) if none of subparagraphs (A) through 

2 (C) applies, the customer’s address that is ei3 ther known to the seller or, if not known, ob4 tained by the seller during the consummation of 

5 the transaction, including the address of the 

6 customer’s payment instrument if no other ad7 dress is available; 

8 (E) if an address is neither known nor ob9 tained as provided in subparagraph (D), the ad10 dress of the seller from which the digital good 

11 or digital service was sold; and 

12 (F) notwithstanding subparagraphs (A) 

13 through (E), for digital goods that are delivered 

14 or transferred, or digital services that are pro15 vided, to a person other than the customer, in16 cluding advertising services, the location of de17 livery, transfer, or provision if known or, other18 wise, the customer’s address determined under 

19 subparagraph (D) or (E). 

20 (3) DELIVERED OR TRANSFERRED ELECTRONI21 CALLY; PROVIDED ELECTRONICALLY.—The term 

22 ‘‘delivered or transferred electronically’’ means deliv23 ered or transferred by means other than tangible 

24 storage media and the term ‘‘provided electronically’’ 

25 means provided remotely via electronic means. 


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1 (4) DIGITAL CODE.—The term ‘‘digital code’’ 

2 means a code that conveys only the right to obtain 

3 a single type of digital good or digital service. 

4 (5) DIGITAL GOOD.—The term ‘‘digital good’’ 

5 means any good or product that is delivered or 

6 transferred electronically, including software, infor7 mation maintained in digital format, digital audio8 visual works, digital audio works, and digital books. 

9 (6) DIGITAL SERVICE.— 

10 (A) IN GENERAL.—The term ‘‘digital serv11 ice’’ means any service that is provided elec12 tronically, including the provision of remote ac13 cess to or use of a digital good. 

14 (B) EXCEPTION.— 

15 (i) IN GENERAL.—The term ‘‘digital 

16 service’’ does not include telecommuni17 cations service, Internet access service, or 

18 audio or video programming service. 

19 (ii) AUDIO OR VIDEO PROGRAM20 MING.—The term ‘‘audio or video pro21 gramming’’ means programming provided 

22 by, or generally considered comparable to 

23 programming provided by, a radio or tele24 vision broadcast station. 


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1 (iii) VIDEO PROGRAMMING.—The term 

2 ‘‘video programming’’ shall not include 

3 interactive on-demand services (as defined 

4 section 602(12) of the Communications 

5 Act of 1934 (47 U.S.C. 522(12)), pay-per6 view services, or services generally consid7 ered comparable to such services regardless 

8 of the technology used to provide such 

9 services. 

10 (7) DISCRIMINATORY TAX.— 

11 (A) IN GENERAL.—The term ‘‘discrimina12 tory tax’’ means any tax imposed by a State or 

13 local jurisdiction— 

14 (i) on or with respect to the sale or 

15 use of any digital good or digital service at 

16 a higher rate than is generally imposed on 

17 or with respect to the sale or use of tan18 gible personal property or of similar serv19 ices that are not provided electronically; 

20 (ii) on or with respect to any seller of 

21 digital goods or digital services at a higher 

22 rate or by incorporating a broader tax base 

23 than is generally imposed on or with re24 spect to sellers in transactions involving 

25 tangible personal property or involving 


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1 similar services that are not provided elec2 tronically, except that this clause shall 

3 apply only to the extent that the higher 

4 rate or broader tax base is attributable to 

5 the fact that such person sells digital goods 

6 or digital services; 

7 (iii) that is required to be collected 

8 with respect to the sale or use of digital 

9 goods or digital services by different sellers 

10 or under other terms that are disadvanta11 geous to those applied in taxing the sale or 

12 use of tangible personal property or of 

13 similar services that are not provided elec14 tronically; or 

15 (iv) on or with respect to any sepa16 rately stated amount that is charged by 

17 the seller of a specific digital good or dig18 ital service, and is directly related to elec19 tronically delivering or transferring that 

20 good or providing that service, at a higher 

21 rate than is generally imposed on or with 

22 respect to delivery charges, or shipping and 

23 handling charges, on tangible personal 

24 property. 


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1 (B) APPLICATION.—For purposes of this 

2 paragraph, all taxes, tax rates, exemptions, de3 ductions, credits, incentives, exclusions, and 

4 other similar factors shall be taken into account 

5 in determining whether a tax is a discrimina6 tory tax. 

7 (8) GENERALLY IMPOSED.—A tax shall not be 

8 considered ‘‘generally imposed’’ if it is imposed only 

9 on specific services, specific industries or business 

10 segments, or specific types of property. 

11 (9) MULTIPLE TAX.—The term ‘‘multiple tax’’ 

12 means any tax that is imposed on or with respect to 

13 the sale or use of a digital good or a digital service 

14 by a State or local jurisdiction, for which such State 

15 or local jurisdiction gives no credit with respect to 

16 a tax that was previously paid on or with respect to 

17 the sale or use of such digital good or digital service 

18 to another State or local jurisdiction, unless the ter19 ritorial limits of the jurisdiction imposing the earlier 

20 tax and the jurisdiction imposing the later tax both 

21 encompass the same tax address of the customer. 

22 (10) PURCHASE FOR RESALE.—A digital good 

23 or digital service is purchased for the purpose of re24 sale if such good or service is purchased for the pur25 pose of reselling it, or for using it as a component 


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1 part of or integration into another digital good or 

2 digital service that is to be sold to another person, 

3 and includes the purchase of a digital good or digital 

4 service for further commercial broadcast, rebroad5 cast, streaming, restreaming, transmission, retrans6 mission, licensing, relicensing, reproduction, copying, 

7 distribution, redistribution, or exhibition of the dig8 ital good or digital service, in whole or in part, to 

9 another person. 

10 (11) SALE AND PURCHASE.—The terms ‘‘sale’’ 

11 and ‘‘purchase’’, and all variations thereof, shall in12 clude lease, rent, and license, and corresponding 

13 variations thereof. 

14 (12) SELLER.—The term ‘‘seller’’ means a per15 son making sales of tangible personal property, dig16 ital goods, digital services, or other services, and 

17 does not include a person that provides, on behalf of 

18 another person, order taking, order fulfillment, bill19 ing, or electronic delivery or transfer service with re20 spect to the sale of a digital good or a digital serv21 ice. 

22 (13) STATE OR LOCAL JURISDICTION.—The 

23 term ‘‘State or local jurisdiction’’ means any of the 

24 several States, the District of Columbia, any terri25 tory or possession of the United States, a political 


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1 subdivision of any State, territory, or possession, or 

2 any governmental entity or person acting on behalf 

3 of such State, territory, possession, or subdivision 

4 and with the authority to assess, impose, levy, or 

5 collect taxes. 

6 (14) TAX.—The term ‘‘tax’’ means any charge 

7 imposed by any State or local jurisdiction for the 

8 purpose of generating revenues for governmental 

9 purposes, including any tax, charge, or fee levied as 

10 a fixed charge or measured by gross amounts 

11 charged, regardless of whether such tax, charge, or 

12 fee is imposed on the seller or the customer and re13 gardless of the terminology used to describe the tax, 

14 charge, or fee. Such term does not include a tax on 

15 or measured by net income or an ad valorem tax. 

16 SEC. 6. FEDERAL JURISDICTION. 

17 Notwithstanding section 1341 of title 28, United 

18 States Code, and without regard to the amount in con19 troversy or citizenship of the parties, a district court of 

20 the United States has jurisdiction, concurrent with other 

21 jurisdiction of courts of the United States and the States, 

22 to prevent a violation of this Act. 

23 SEC. 7. EFFECTIVE DATE; APPLICATION. 

24 (a) GENERAL RULE.—This Act shall take effect on 

25 the date of the enactment of this Act. 


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1 (b) APPLICATION TO LIABILITIES AND PENDING

2 CASES.—Nothing in this Act shall affect liability for taxes 

3 accrued and enforced before the date of the enactment of 

4 this Act, or affect ongoing litigation relating to such taxes, 

5 except as provided in section 4(d) of this Act. 

6 SEC. 8. SENSE OF CONGRESS. 

7 It is the sense of Congress that each State shall take 

8 reasonable steps necessary to prevent multiple taxation of 

9 digital goods and digital services in situations where a for10 eign country has imposed a tax on such goods or services. 

11 SEC. 9. SAVINGS PROVISION. 

12 If any provision or part of this Act is held to be in13 valid or unenforceable by a court of competent jurisdiction 

14 for any reason, such holding shall not affect the validity 

15 or enforceability of any other provision or part of this Act. 

Æ 


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